JIT and cost control (Appendix)

LO₅Fancher Fixtures produces 50,000 units each day and the average number of units in work in process is 200,000. The average annual inventory carrying cost percentage is 20% and the average work in process is $1,000,000.

Required:

1. Determine the throughput time.

2. Compute the annual carrying costs.

3. If the same daily output can be achieved while reducing the work in process by 75%, determine the new throughput time.

4. What has happened to the velocity of production in part 3?

5. Compute the annual carrying costs for part 3.